When considering the financial markets, 2015 certainly hasn’t been a boring year. Indeed, investors are waiting on the edges of their seats for what will come next. In case you’ve forgotten the key events of the year, we’ve taken a look at the defining financial moments of 2015.
When the Swiss National Bank unpegged the franc
In the world of central banking, slow and considered decisions are the aim. However, on January 15th the SNB announced that it would no longer hold the Swiss Franc at a fixed exchange rate with the Euro. Panic ensued.
The Swiss stock market collapsed, the Franc soared, and the Euro fell from 1.2 Swiss francs on the Wednesday to 0.85 francs on the Thursday. Swiss companies were worried that it would be more difficult to sell their wares to European customers, something particularly poignant as 70% of the Swiss GDP is raised through exports.
The Greek Fiasco
One way in which 2015 will be remembered is by the Greek crisis which shaped the summer. This year, Greece received its third bailout in five years after missing a $1.7 billion IMF payment – the first time this has happened.
The Syriza Party was voted in at the beginning of the year, promising less austerity. And yet on July 13, even after a referendum to the contrary, Tsipras agreed on a third bailout with austere conditions. This is still a contentious issue. Earlier this month, the 2016 Greek budget was harshly opposed in government and was only passed with a small minority.
China put up defences
Alongside the Greek crisis were the tumultuous reports coming from the Chinese economy, indicating an economic slowdown. Industrial production, investment and retail sales data for July were weaker than expected, with Chinese exports falling 8.3% in July.
Chinese exports had gone up in price with the yuan tracking the dollar. The authorities took action: with the yuan devalued by nearly 2% against the US dollar, twice in two days. They were perhaps right in doing this: China’s growth for the third quarter was 6.9%, a six year low.
Volkswagen disappoints and outrages
On the 18th September, it came to light that Volkswagen had been cheating nitrogen oxide emissions tests – with nearly 11 million diesel vehicles being involved. Volkswagen admitted understating carbon dioxide emissions as well, and fuel usage for around 800,000 vehicles.
How did the market react? Nearly 30% of the company’s market value has been wiped out since the scandal first came to light, which also means losses for shareholders such as Qatar and Porsche. Indeed, the BBC reported that sales fell 20% in the UK in November.
“So when are they going to raise interest rates?”
The question of whether the Fed will raise interest rates or not, and when this would take place, has been on the lips of investors throughout the year. The long wait came to an end, however, on the 16th December when the FOMC raised interest rates by 0.25%.
When the announcement came, there was great celebration in the stock markets, with the main share indexes in the UK, France and Germany all up by between 1% and 2% in early trade, and the Dow Jones closing up 224 points at 17,749, a 1.3% gain. The Fed said that the rise was part of a “gradual process” to get rates back to normal. Investors will be watching and waiting to see if this theme continues into the New Year.
The Dramatic fall of Gold
In August 2011, at the height of the European debt crisis, gold was at around $1,900. It’s now slumped to somewhere around $1,050. Investors worried about the effects of quantitative easing, the Greek crisis and the state of the American economy, have all had their worries (at least partially) absolved. So their gold shares are being sold, and they’re looking for riskier assets. Put simply, higher returns can be generated elsewhere.
Just how low will gold drop? Only time will tell.
The devaluation of the Euro
2015 has seen the dollar against the euro drop to unprecedented levels with the euro dropping from 1.23 dollars per euro to around 1.06.
In January of this year, the ECB took the unprecedented move of announcing that they would undertake quantitative easing in order to stabilise the faltering Eurozone economy. For those unfamiliar with quantitative easing, it is simply when the central bank purchases non-treasury securities in the open market, effectively injecting money into the system.
Since quantitative easing, the euro has fallen an additional 16%, which are price levels not seen since the early 2000s.
On a happier note – Britain’s FinTech market is booming
The rise of FinTech is almost considered inevitable now, as millennials seek to bring some modernity to the financial world. With the increase of robo-advisers and mobile trading apps, financial businesses are looking for new ways to appeal to a generation who has little spare time.
The UK is taking FinTech seriously, with more and more FinTech businesses setting up shop in London’s Silicon Roundabout. London is now one of the biggest FinTech clusters in the world; the sector attracted $554 million in just the first nine months of 2009.
The UK government has announced plans to create 100,000 new jobs in the sector by 2020 and has even got its own FinTech envoy – entrepreneur Eileen Burbidge.
With this general trend, here at ayondo, we are certainly hoping for great things in 2016.